April 12 (Bloomberg) -- The third consecutive annual copper
shortage and accelerating U.S. growth will drive prices to the
highest in a year in the next quarter, according to the most
accurate forecasters.

Supply will fall 278,000 metric tons short of demand in
2012, more than North America uses in a month, Barclays Capital
estimates. Hedge funds, which were betting on lower prices as
recently as January, are now the most bullish in eight months,
Commodity Futures Trading Commission data show. The metal will
average $9,000 a ton in the third quarter, 9.5 percent more than
now, according to the median estimate of the top five analysts
in Bloomberg Rankings in the past eight quarters.

Copper is rebounding from a 21 percent slump in 2011 as
data showed a strengthening U.S. economy and as European leaders
moved to contain the region’s debt crisis. North America and
Europe account for 29 percent of demand, Barclays estimates.
While China cut its growth target to the lowest in eight years
last month, the world’s biggest copper buyer will still be
expanding at more than twice the global pace predicted by the
International Monetary Fund.

“The U.S. economy is pretty good,” said James Paulsen,
the chief investment strategist at Minneapolis-based Wells
Capital Management, which oversees about $333 billion of assets.
“Emerging markets should start to pick up. Some time by the end
of the year we may look back at commodity prices in general and
copper in particular and say this was a good time to buy.”

BHP Billiton

Copper rose 8.2 percent to $8,220 on the London Metal
Exchange since the start of January, exceeding the 6.6 percent
advance in the Standard & Poor’s GSCI gauge of 24 commodities.
The predicted $9,000 average would be the most since the second
quarter of last year. The MSCI All-Country World Index of
equities advanced 9.1 percent this year as Treasuries lost 0.3
percent, a Bank of America Corp. index shows.

Shares of Freeport-McMoRan Copper & Gold Inc., the biggest
publicly owned copper producer, will gain 41 percent to $53.39
in the next 12 months, according to the average of 18 analyst
estimates compiled by Bloomberg. Those of BHP Billiton Ltd., the
second largest, will advance 35 percent to A$45.88, the average
of 13 predictions show.

Average Discount

Stockpiles in warehouses monitored by the LME declined 28
percent this year and those tracked by the Comex exchange in New
York fell 5 percent, data from the bourses show. Metal for
immediate delivery is trading at a $45-a-ton premium to the
benchmark three-month contract on the LME, compared with an
average discount of almost $10 in the past two years. The
turnaround indicates mounting concern about near-term supply.

That concern may be limited to European and U.S. buyers.
Reserves monitored by the Shanghai Futures Exchange more than
tripled since the beginning of December to 222,092 tons. Traders
may be holding as much as another 650,000 tons in bonded
warehouses in Shanghai that aren’t tracked by the bourse,
compared with 200,000 tons in November, Barclays said in a
report March 28.

While China’s March copper imports rose 52 percent from a
year earlier, they were 4.6 percent lower than in February,
customs data showed April 10. The nation accounts for 40 percent
of demand, according to Barclays. Premier Wen Jiabao cut the
growth target for gross domestic product to 7.5 percent last
month, the lowest since 2004. The IMF expects a 3.3 percent
global expansion this year.

Federal Reserve

Copper fell to a three-month low this week after a Labor
Department report showed U.S. employers added the fewest jobs in
five months in March. Federal Reserve Chairman Ben S. Bernanke
said in a speech April 9 that the U.S. was still “far from
having fully recovered.” Sales of new U.S. homes in February
unexpectedly fell to the slowest pace since October, the
Commerce Department said March 23. Spain’s Economy Minister Luis
de Guindos declined April 10 to rule out a rescue for his
country, which is battling its second recession since 2009.

“It would take some sort of global growth to pull copper
up, but it’s hard to see where that’s going to come from,” said
Jeffrey Sherman, who helps manage about $30 billion of assets
for DoubleLine Capital in Los Angeles. “Europe can’t do it, the
U.S. has a housing overhang and the Chinese have lowered their
growth forecast. Without China it’s going to be tough.”

U.S. manufacturing expanded at a faster pace in March, the
Institute for Supply Management reported April 2. Growth in the
world’s largest economy will accelerate this quarter and the
next, according to the median of 73 economist estimates compiled
by Bloomberg. Consumer confidence climbed to the highest level
in four years in the week ended April 1, the Bloomberg Consumer
Comfort Index shows.

U.K. Manufacturing

There are also signs some European economies are improving,
with German factory orders increasing 0.3 percent in February,
compared with a 1.8 percent contraction a month earlier, the
Economy Ministry said April 4. U.K. manufacturing accelerated at
the fastest pace in 10 months in March, Markit Economics said in
a report April 2.

Global demand for consumer goods made with copper is also
growing. Sales of cars and light vehicles will rise 5.3 percent
to a record 79.3 million units this year, according to LMC
Automotive Ltd., a researcher in Oxford, England. More than 50
pounds (23 kilograms) of copper are used in a typical U.S.-built
vehicle, the Copper Development Association estimates.

Mining companies will struggle to keep up. Production will
rise 3.2 percent this year to 20.26 million tons as demand
increases 2.8 percent to 20.54 million tons, Barclays estimates.
Global stockpiles will decline to 1.07 million tons, from 1.23
million tons in 2011, the bank predicts.

Goldman Sachs

Barclays is forecasting a third-quarter average of $9,000.
Goldman Sachs Group Inc. told clients in a report on April 3
that prices would reach $9,000 in three months. The analysts
surveyed by Bloomberg -- Danske Bank A/S, TD Securities Inc.,
UniCredit SpA, Prestige Economics LLC and Landesbank Baden-Wuerttemberg -- predicted a fourth-quarter average of $9,039.

Speculators increased bets on higher copper prices by 25
percent to 18,642 U.S. futures and options in the week ended
April 3, the most since Aug. 2, CFTC data show. They were
wagering on a decline from mid-September to mid-January.

“Current demand is sufficient to move copper prices
higher, and copper will rise in the back half of the year,”
said John Stephenson, who helps manage $2.7 billion of assets at
First Asset Investment Management Inc. in Toronto. “Copper has
better fundamentals than any other industrial metal. Physical
supply is tight, and you’re looking at a market that will remain
tight for at least another year.”